Colette Morin-Wade and Terence Stechysin

COMPETITION BUREAU OF CANADA

- COMPLIANCE -

COLLUSION, NOT A NEW PHENOMENON…

“People of the same trade

seldom meet together, even for

merriment and diversion,

but the conversation ends in a

conspiracy against the public, or

in some contrivance to raise

prices.”

-Adam Smith, The Wealth of Nations, 1776

• Independent federal law enforcement agency

• Our role is to help the Canadian marketplace be more competitive

and innovative for the benefit of businesses and

consumers, through:

– Competition enforcement

– Competition promotion

• The Competition Promotion Branch actively encourages the

adoption of pro-competition positions, policies, and behavior

• The Cartels Directorate detects, investigates and deters hard core

cartels, including conspiracies, agreements or arrangements

among competitors and potential competitors to fix prices, rig

bids, allocate markets or restrict supply

COMPETITION BUREAU

THE COMPETITION ACT

• Contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace

• Under the Competition Act, the Bureau is responsible for:

– Investigating criminal conspiracies and bid-

rigging

– Ensuring truth in advertising

– Preventing abuse of dominance

– Reviewing mergers

• Shared compliance approach: we all have a role to play

– Bureau: Uses a variety of tools,

including outreach, enforcement

and advocacy

– Legal community: Makes clients

aware of their obligations

– Business community: Implements

and abides by compliance programs

– Procurement community: Prevents

and identifies bid-rigging schemes

COMPETITION BUREAU

Compliance

Business

Legal Bureau

BID-RIGGING OFFENCE

• Call for bids or tenders

• Two or more persons agree:

• not to submit a bid, or

• to withdraw their bid

• Two or more bidders submit bids arrived at by

agreement

• Person calling for bids or tenders is not informed of

the agreement

•No upper limit on fines – and/or

•Imprisonment up to 14 years

•Criminal record for individuals

•Civil damages (possible)

BID–RIGGING PENALTIES

SOME INDUSTRIES ARE MORE SUSCEPTIBLE

• Be especially vigilant when

tender involves:

– Similar products

– Few or no close substitutes

– Simple products or services

– No significant technological

changes

– A small number of suppliers or

customers

– Few new entrants

– Active trade association

COMMON FORMS OF BID-RIGGING

• Cover bidding – fake bidding

• Bid suppression – withholding bids

• Bid rotation – rotating agreed best bid

• Market division – carving up the market

WARNING SIGNS INVOLVING

BID SUBMISSIONS AND OUTCOMES

• Competitors’ bids are received together

• Identical irregularities in bids

• Suppliers meet before they submit tenders

• Suppliers that would normally tender fail to

• Only one bidder contacts consultants/wholesalers for pricing information

WARNING SIGNS INVOLVING

BID SUBMISSIONS AND OUTCOMES (2)

• Winning bidder does not accept the contract

• Winning bidder subcontracts work to unsuccessful bidders

• Same supplier is often the successful bidder

• Pattern suggesting rotation of successful bids among several suppliers

WARNING SIGNS INVOLVING PRICING

• Identical bid amounts – especially in areas where you would expect variation

• Large difference between price of winning bid and other bids

• Significant change from past price levels after a new entrant or infrequent supplier

SOURCES OF INFORMATION

Immunity/Leniency

Program

Complaint and

Media

Whistleblower

Informant

COMPETITION

BUREAU

INVESTIGATION PROCESS

INFORMATION

OF AN ALLEGED

OFFENCE

PRELIMINARY

EXAMINATION

GROUNDS TO

BELIEVE

FORMAL INQUIRY

INVESTIGATIVE

TOOLS:

-SEARCH WARRANTS

-HEARINGS

-SUBPOENA

-WIRETAP

-MUTUAL LEGAL

ASSISTANCE TREATY

DISCONTINUANCE

ALTERNATIVE

CASE RESOLUTION

REFERRAL TO

PUBLIC

PROSECUTION

SERVICE OF

CANADA

CASE: HIBERNIA OIL PLATFORM

• Bid-rigging in the supply and

installation of a system to

reinforce the concrete base

of the Hibernia Development

project

• The offence took place 7

years prior to detection

Library and Archives Canada (LAC)

• In May 2014, the Bureau laid charges against one company and six individuals in relation to a bid-rigging conspiracy for federal government contracts for the supply of IT services to Library and Archives Canada (LAC).

• Three of the individuals allegedly involved in the conspiracy were employed by LAC at the time, and have been charged under subsection 80(1) of the Financial Administration Act for allegedly making opportunity for another person to defraud the government.

• In May 2015, one of the individuals charged under the Competition Act pleaded guilty to bid-rigging and received am 18-month conditional sentence, with the first six months to be served under house arrest. This individual was also fined $23,000 and ordered to perform 60 hours of community service.

Library and Archives Canada (continued)

• In August 2016, another individual charged under the

Competition Act pleaded guilty and received a similar sentence. Her plea agreement also requires her to participate in

two public presentations alongside Competition Bureau staff to

raise awareness about compliance with the Competition Act.

• December 2016, one of the LAC employees pleaded guilty under

the FAA for her involvement in the conspiracy. She received a

criminal record with 15 months probation and 100 hours of

community service.

• At this time, it appears that the remaining accused in this matter

will stand trial.

PREVENTING RIGGED BIDDING

Protect procurement integrity in key areas:

1. Establishing bidding pool

2. Drafting tender specifications

3. Awarding contracts

4. Training and auditing

5. Disclosure of communications

1. ESTABLISHING BIDDING POOL

• Maximize the pool of potential bidders

• Know your suppliers and their market prices

• Be aware of price changes for supply inputs

• Know prices in other departments

• Avoid obligatory bids

• Keep bids confidential

2. DRAFTING TENDER SPECIFICATIONS

• Require disclosure regarding potential

subcontractors and their pricing

• Allow for substitute products whenever possible –

focus on specific performance

• Avoid preferential treatment for a certain class of

suppliers

• Avoid predictability – consider combining or dividing

contracts

3. AWARDING CONTRACTS

• Avoid splitting contracts

between suppliers with

identical bids

• Ask questions if prices or

bids don’t make sense

4. TRAINING AND AUDITING

• Training on bid-rigging

• Review tender history/results periodically, especially

in susceptible industries

• Conduct interviews with:

– Vendors who no longer offer supply

– Unsuccessful vendors

• Complaint mechanism for suppliers to convey

competition concerns

5. DISCLOSURE OF COMMUNICATIONS

• Use a “Certificate of Independent Bid Determination” – One example available on our website

• Requires disclosure of communications between bidders – A warning to suppliers that you are proactive in detecting and

preventing collusion

IF YOU SUSPECT BID-RIGGING

• Thoroughly record details of all relevant behaviour

• Do not discuss with suspected participants

• Decide whether or not to continue with the tender

• Contact the Competition Bureau

COMPLIANCE PROGRAMS – HOW CAN THEY HELP?

• A corporate compliance program is a system which is designed to detect and minimize violations of the law

• Importance to public procurement authorities:

– Businesses who have compliance programs and who

comply with the law minimize their risk of engaging in bid-rigging

– A procurement authority can utilize a compliance program as a means to formulate, disseminate and implement the tendering process in a structured and systematic manner

PURPOSE – BUSINESS PERSPECTIVE

• Inform parties of how to minimize contraventions of the Acts

• Detect at an early stage actions that may contravene the Acts

• Identify circumstances where a party is potentially affected by anti-competitive conduct of other parties

BENEFITS – BUSINESS PERSPECTIVE

• Reduces cost of non-compliance such as exposure to criminal or

civil liability

• Triggers early warnings

• Can assist a business in its dealings with the Bureau

• May allow a business to qualify for favorable treatment

• Increased awareness of anti-competitive activity from third parties

• Improves a businesses’ ability to:

• attract and retain customers;

• recruit and retain skilled staff

• Helps maintain a good reputation

BENEFITS TO PROCUREMENT AUTHORITIES

• Procurement authorities benefit from doing business with companies who have compliance programs in place

• Businesses with effective compliance programs are less likely to engage in anti-competitive behavior such as bid-rigging

• Where appropriate, the existence of a compliance programs can be set as a pre-requisite qualification in the tendering process

CORPORATE COMPLIANCE PROGRAMS BULLETIN

• Revised version published in June 2015

• Provides guidance and incentives for Canadian businesses to develop and maintain a compliance program

• Raises the standards for compliance acceptable to the Bureau

• Outlines the seven requirements for a credible and effective program

• Provides incentives

• Provides tools designed to help businesses through the process step-by-step

BASIC REQUIREMENTS: 7 ESSENTIAL ELEMENTS

TOOLS TO ASSIST BUSINESSES

• There are many tools found in the Bulletin’s appendices:

• Corporate Compliance Program Framework

• Employee Certification letter

• Due Diligence Checklist

• Hypothetical Case Examples

• There are many additional resources available to assist in the development and elaboration of corporate compliance programs:

• ICC Compliance Toolkit

• Society of Corporate Compliance & Ethics

• Autorité de la concurrence (France)

HOW TO CONTACT

THE COMPETITION BUREAU

• Website

– www.CompetitionBureau.gc.ca

• Fax

– 819-997-0324

• Telephone

– Toll free: 1-800-348-5358